The online retailer has spent nearly $300 million acquiring three shipping software vendors over the past nine months.
After a stumbling start, ToysRUs.com gets its act together and puts the brand power of the nation’s largest toy specialty chain to work online.
Built-in brand recognition is a big plus when launching online, but as retail toy giant Toys R Us Inc. found, it’s only half the battle. Three years ago as an Internet newbie, the 50-something brand took a major drubbing over well-publicized holiday shipping trouble which suggested that in going online it had bitten off more than it could chew.
Fast-forward to Holiday 2002, however, and ToysRUs.com is looking like a winner. With holiday sales that rose 12% to $179 million year over year, and 11-month sales that jumped 24% to $326 million, the web was a bright spot whose gains outshone the performance of Toys R Us stores. By contrast, comparable U.S. store sales dropped 1% from both the previous holiday period and in the first 11 months, prompting January layoffs of more than 700. Including results for ex-U.S. comparable store sales, sales at other stores operated by the company, and the web’s contribution, Toys R Us Inc. posted total holiday sales that grew a mere 2% from last year to $4.4 billion.
So what happened at ToysRUs.com between its stumbling launch and now? The privately held company, which operates independently of Toys R Us Inc., regrouped and looked for solutions. Among them was a groundbreaking alliance with Amazon.com in 2000 that aimed to shore up ToysRUs.com’s fulfillment and technology infrastructure issues, while boosting Amazon’s toy sourcing power and toy industry expertise. Another was to leverage the web for what it can do best-quickly establish niches that appeal to a
targeted group of buyers without the huge investment that such a move would take in stores.
Blocking and tackling
Two years later, the numbers suggest that the Amazon partnership is doing what it set out to do. “We’ve spent the majority of the past three years perfecting the blocking and tackling of e-commerce. That’s the right product, the right price, the right box to the right house-and making sure we can do that on a scalable basis,” says Greg Ahearn, vice president and general manager of ToysRUs.com.
Though it may have mastered the blocking and tackling of e-commerce, at this point, so have plenty of other online retailers. Today, ToysRUs.com faces the tough economic climate that challenges all of retail, consumers’ changing shopping habits, and increased competition from big-box merchants, led by the seemingly inexorable march of Wal-Mart Stores Inc. and WalMart.com. Competing on the playing field now takes more than a mastery of the basics, a fact that’s guiding the next stage of development at ToysRUs.com “We’re at the point where we are looking at how to get more sophisticated in how we market to our customers in a more proactive and meaningful way,” says Ahearn.
Toward that end, ToysRUs.com pursues the strategy of life stage marketing. It mirrors to some extent the strategy at Toys R Us Inc., which seeks to draw parents of infants to its Babies R Us stores and then transitions them over time to both Toys R Us and Kids R Us stores, which offer clothing and other gear.
But ToysRUs.com takes the strategy further, with a large and growing collection of web site sub-brands that target parents and kids at more discrete stages of the child’s development from prenatal needs into the teens.
Core to that strategy is BabiesRUs.com, launched by Toys R Us as a stand-alone site and bought onto the Amazon platform in 2001.The site, stocked with prenatal and infant gear, offers an online gift registry for expectant mothers. Though the company doesn’t break out online sales by sub-brand, executives call BabiesRUs.com “a significant contributor to online revenue.” With only about 160 Babies R Us stores, the web turns the store brand into a bigger national brand, as a large number of registries are created by expectant mothers located in areas without Babies R Us stores.
Toys for adults
To handle educational toy needs from the toddler stage into pre-teen years, ToysRUs.com offers Imaginarium.com, the online presence of a store brand that’s a collection of learning products ranging from musical blocks to interactive electronic toys such as LeapPad books to science kits for the pre-teen. There’s also Baby Imaginarium, a sub-brand that offers a transition point between infant necessities and a baby’s first educational toys.
Now, to capture sales as preteens become teenagers, ToysRUs.com has within the past few months added RZonegames.com, focusing on video games and youth electronics, which even offers some handhelds that teens can use to prepare for college admissions tests such as the SAT. There’s even an offering for adults seeking toys for themselves: a Collectors tab on ToysRUs.com features an assortment of special, limited editions of collectible toys.
“We want to serve Mom’s toy and leisure product needs all the way through the life stages her kids are going through,” Ahearn says. “And over the last few years we’ve been filling in the building blocks we need to be able to do that.” The integrated approach, he adds, creates a trail that helps Mom-as-consumer move from stage to stage with the expectation of consistent quality and service as she progresses to different offerings within the larger brand.
To support the life stage offerings, the web site wraps them in services. BabiesRUs.com customers, for example, can opt to receive a newsletter that focuses on pregnancy and the childrearing experience, which aims to keep them interested in the site throughout that stage of their child’s development. Visitors to Imaginarium and Baby Imaginarium on the site can shop for educational toys by age or by learning value, according to what subject areas they want to pursue with their child.
If the toy business today is largely a commodities business, then the launching of the sub-brands on the web site, particularly Imaginarium and Baby Imaginarium, allows mass toy merchant ToysRUs.com to expand into toys that aren’t really considered mass merchandise. “Yet they are some of the best-selling, higher-quality specialty brands, such as Brio and Playmobil, that are out there,” Ahearn says.